Korea is a rising powerhouse in outbound M&As

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Korea is a rising powerhouse in outbound M&As


Korean companies bought up more foreign companies than ever before last year as Korea’s economic status rises in the world.

While advanced economies are putting up more companies for sale in the deepening downturn, Korea and other Asian countries with more positive economic conditions and more relative buying power have emerged as bigger spenders in the global M&A market.

Korea is estimated to be tenth in outbound cross-border M&As in the world. With foreign purchases growing faster than most other nations, experts predict that Korea will continue the trend set by Fila Korea and Mirae Asset Securities in acquiring Acushnet Company, makers of Titleist golf products, as Korean companies’ cash holdings are expected to continue increasing.

According to the Korea Capital Market Institute, Korean companies acquired some $11.2 billion in foreign companies between Jan. and Oct. 2011. The nation is poised to see the largest amount of outbound cross-border M&As ever, continuing the trend of increases after $11.9 billion in 2010 and $6.8 billion in 2009.

The growth of Korea’s outbound M&As outpaced that of other nations as well. According to the United Nations Conference on Trade and Development, the net amount of outbound M&A deals signed by Korean companies increased in the space of five years from $190 million in 2005 to $9.9 billion in 2010.

The outbound M&A deals tracked by the UNCTD exclude any corporate acquisitions by foreign affiliates of Korean companies.

The size of Korea’s outbound M&As exceeded countries like France and Germany, with $7.2 billion and $7.1 billion respectively, in such deals as of 2010. This was a change of fortune from 2009, when the two European countries had bought some $41.6 billion and $24.4 billion in foreign companies respectively.

Such a downward trend in outbound M&As was pervasive in Europe under the strains of an ever-growing fiscal debt crisis during the last two years. In fact, Italy and Portugal, which faces some of the worst debt burdens in Europe, had sold $5.3 billion and $8.9 billion worth of their domestic companies respectively to foreign companies in 2010. On the other hand, companies from Asian nations such as Japan and China bought $31 billion and $29.2 billion worth of foreign companies each in 2010.

“Recently, the scale of outbound M&As by Korean companies has been growing,” said Ahn Yoo-mi, research fellow at KCMI. “With abundant cash flows, they will continue to acquire foreign companies in greater numbers.”

With Korean companies reaching into their coffers for larger and larger companies, experts say that the sellers’ treatment in the global M&A market has transformed from the days when local companies suffered from lack of information about choice buys.

“Just the year before last year, Korean companies were not contacted whenever foreign companies came on the market,” said an official from Mirae Asset Maps Investment Management.

By Lee Jung-yoon [joyce@joongang.co.kr]
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